The country’s central bank, the Reserve Bank of India (RBI), has recently amended these gold loan rules. Let’s know what they are. The Reserve Bank has allowed voluntary pledging of gold or silver jewellery for agricultural and small business loans under a collateral-free limit.
Borrowers can avail voluntary loans by pledging gold or silver up to the collateral-free limit. Banks can sanction loans to them. This clarification refers to the previous instructions on credit to agriculture issued in December 2024 and the Master Guidelines on credit to MSMEs.
In a circular issued on Friday, the RBI said, “If borrowers voluntarily pledge gold and silver, banks may sanction loans without any collateral under the existing circulars/guidelines. These loans will not be treated as a violation of the above guidelines.” The central bank said the new rules will be applicable to all commercial banks, regional rural banks, small finance banks and all state and district cooperative banks.
According to RBI guidelines, banks should not take collateral for loans up to Rs 10 lakh in the micro and small enterprise (MSE) sector. It has also ordered that loans up to Rs 10 lakh given under the Prime Minister Employment Generation Programme (PMEGP) scheme should be given without collateral. Besides, it has been advised that banks should closely examine the financial condition of the MSE unit and its track record of financial transactions. If the appropriate authority gives approval, it has disclosed that mortgage loans up to Rs 25 lakh can be provided. RBI has ordered that mortgage security and margin be waived for loans up to Rs 2 lakh in the concerned sectors.
In terms of valuation, RBI has stated that the value of gold or silver accepted as collateral shall be determined on the basis of a reference price as per its actual purity (caratage). For this purpose (a) the average closing price of the last 30 days for gold or silver of that particular purity, or (b) the closing price of the previous day for gold or silver of that particular purity published by the India Bullion and Jewellers Association Limited (IBJA) or a commodity exchange regulated by the Securities and Exchange Board of India (SEBI) shall be used.
